Heritage’s new Citrus Re 2022 cat bond priced above guidance

Florida headquartered but nationally expansive property and casualty insurer Heritage Insurance Holdings, Inc. has now secured its new Citrus Re Ltd. (Series 2022-1) catastrophe bond at the original $100 million size, but with pricing now fixed above the initial guidance range.

It’s the latest signal on pricing for US wind exposed reinsurance protection in catastrophe bond form, while the pricing also likely reflects the fact Heritage has benefited from a number of recoveries through its catastrophe bond program in the past.

Heritage returned to the catastrophe bond market for the first time since 2017 around the middle of March, seeking $100 million or more of north-east US named storm reinsurance protection for the carriers acquired Narrangasett Bay insurance portfolio with this Citrus Re 2022-1 cat bond.

The Citrus Re Series 2022-1 catastrophe bond will provide Heritage with reinsurance protection against north-east US named storm risks across the states of Connecticut, Delaware, Maryland, Massachusetts, New Jersey, New York, Rhode Island and Virginia, the locations where its subsidiary insurer Narragansett Bay operates.

The cat bond can be reset to include other states, but these exclude the peak southern hurricane exposed states of Florida, Alabama, Louisiana, Texas and Mississippi and named cedents for this Citrus Re 2022-1 issuance also includes Hawaii based insurer Zephyr, another of Heritage’s carriers, although the initial coverage area does not feature Hawaii.

So, now finalised and priced, the Citrus Re 2022-1 cat bond will provide $100 million of reinsurance protection to cover Heritage’s losses from named storms across those named north-east US states, on a per-occurrence and indemnity trigger basis, across a term that runs to June 2025, so including three full US hurricane seasons.

The Citrus Re Series 2022-1 Class A notes will attach at $390 million of losses and cover a share of Heritage’s exposure up to an exhaustion point of $760 million, giving them an initial attachment probability of 1.95% and an initial expected loss of 1.57%.

The $100 million of Series 2022-1 Class A notes being issued by Citrus Re Ltd. were initially marketed to investors with coupon price guidance in a range from 4.25% to 5%.

The pricing rose and has now been finalised above that initial range, with the $100 million of notes set to pay investors a 5.1% coupon, we now understand.

Heritage has benefited heavily from the reinsurance recoveries its cat bonds provided in the past (some of which is detailed here), so it’s good to see the insurer continuing to place cat bonds within its reinsurance arrangements.

You can read all about this Citrus Re Ltd. (Series 2022-1)  catastrophe bond and every other cat bond issued in our extensive Artemis Deal Directory.